Salesforce.com Upgrades CRM Platform

UPDATED: In its first meeting with Wall Street analysts since its spring IPO,
the company spreads its online CRM gospel while explaining why 'IT
Doesn't Matter.'

UPDATED Salesforce.com's on-demand CRM customers have upgraded to the
enterprise edition 2.0 of its CRM software. This is one reason that the
service of Internet-delivered software is accelerating the commoditization of
traditional enterprise software, said CEO Marc Benioff Wednesday.

The enterprise edition 2.0 upgrade for customers, which is delivered
ASP-style , includes salesforce.com's sforce 4.0, its latest
platform for delivering customized CRM apps over the Internet.

During a meeting with Wall Street analysts Wednesday, Benioff and other
company officials talked up the latest tools of
their trade, while plotting more steps in its quest
to hasten the commoditization of software -- at least, in its software
corner of the world.

"We're commoditizing the technology" of software delivered as a service,
Benioff said, just like an electric company delivers the same commodity to
customers big and small.

"That's the nature of our industry," he said. With the maturation of
browsers, the Internet is providing its own type of platform, as well
and accelerating the shift in how software is delivered, he added.

Despite the new products however, lowered revenue guidance from salesforce.com had investors running for the exits Wednesday. Shares of salesforce.com fell by 27 percent on the day to close at $11.70 after it announced it expected 3 cents per share earnings in its 2005 fiscal year, not the 6 cents per share that analysts had expected.

Salesforce counted 151,000 subscribers to its products, according to Benioff and company officials.
During the first two months of the
second fiscal quarter alone, the company notched about 14,000 new paying
customers.

"So there's a tremendous momentum we're seeing in the
marketplace," said Benioff.

Overall, think of salesforce.com as in the early stages of a coming bell
curve rate of adoption for networked software.

"We're not in the mainstream" yet, he said. "We're the new guys."

For developers working to integrate ISVs with their own or
other companies' database applications, sforce 4.0 features about 100 improvements, officials said.

They include new APIs that enhance new levels of integration
between salesforce.com and other companies' software platforms and more
extensive Bug Fix tools.

There is also a new Web service API for accessing
new objects, as well as previously unavailable objects and related data
operations. As a result, the company said, the semantics of the API remain
unchanged: the new objects will appear automatically via the Enterprise WSDL
(Web Services Description Language) and describe calls.
(Complete schema and access information will be available when the 4.0 WSDL
is released in mid July.)

More layers of customization options await developers and
customers who use the sforce platform to ready their own CRM apps to be
delivered to desktops via the Internet or VPN.

In addition to highlighting some of its customers, the first meeting with
Wall Street analysts since its spring
IPO was a chance for salesforce.com officials to talk up its on-demand business
model. In the process, they shared views about whether IT -- enterprise software
packages in particular, such as CRM -- has
reached commodity status, or can still deliver a competitive advantage for
customers.

During a question and answer session, company officials were asked if
they agree with a controversial theme that emerged about IT
systems having reached commodity status, a claim raised in "IT Doesn't
Matter," Nicholas Carr's "Harvard Business Review" article. Using that theme, an analyst asked
Benioff if the software that salesforce.com is selling should not be
considered a differentiator in the enterprise as well. In an industry that
has loudly rebuked the article's thesis, Benioff took a different position.

"I think enterprise technology companies have sold a lot of companies a
bill of goods," he said, noting the argument that, if a customer buys this
or that enterprise software package, then they are somehow differentiated.
"I think IT is becoming a commodity. I think the Internet drives it to be
more of a commodity."

After all, he added, the industry has a high obsolescence rate.

"We are
on a technology continuum that is driving costs down so fast, and really has
been accelerated by the Internet, and has accelerated even more since
browsers started to stabilize in the late 1990s. They're tools," he said of
software packages, "but they are like any other commodity."

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